28 August - 3 September
Only 8 Ships Waiting Off The LA, Long Beach Ports, But 41 Stranded Off Savannah
Spotlight on the port congestion at the Los Angeles and Long Beach ports finally easing with only 8 ships waiting to berth.
Highlights on retailers’ focus on aggressively clearing excess inventory before peak season starts, the potential for the US manufacturing sector to go through an overhaul, and more.
Trending discussion on the possibility of the US rail freight backlog and crisis causing supply chain chaos in the coming holiday season.
Your Weekly Spotlight
At a moment when COVID emerged as a global pandemic in the summer of ‘20, a deepening supply chain crisis became apparent, metastasizing as bottlenecks across various ports. Uncertainty on when ports would shut down or remain open, and an increase in consumers buying online to deal with work-from-home rules led to a demand-supply gap. As a result, supply chains were disrupted and rates rose, with ports playing host to ships at anchor for as much as 98 days at a time. The West Coast port of Los Angeles was one of the worst affected by congestion. But as of Monday this week, there were only 8 shops berthing at the ports of Los Angeles and Long Beach, the lowest tally in some time.
This might be a positive sign for shippers, retailers, manufacturers, and other stakeholders. But this reprieve, it seems, is only visible at the Los Angeles and Long Beach ports. It’s a different story for North America as a whole, however. The number of container vessels waiting offshore of all ports has remained roughly steady at an extremely elevated level throughout this month, at around 130 ships.
When it comes to the Los Angeles and Long Beach ports as well, the relief is an offshore phenomenon, but congestion still remains on shore. The norm before the pandemic was for no ships, or at most one, to be waiting. The queue first began to climb in October 2020. The number of ships off Los Angeles and Long Beach hit an all-time high of 109 on Jan. 9. At this time last year, there were 48 container vessels waiting offshore, almost six times more than there are now.
As of Tuesday morning, there were still 130 vessels waiting: 41 off Savannah; 24 off Houston; 19 from New York/New Jersey; 14 off Vancouver, British Columbia; 13 off Oakland, California; eight off Los Angeles/Long Beach; seven off Virginia; and four off other ports. West Coast ports accounted for only 27% of the total.
Key Takeaway
The unwinding of the queue in Los Angeles/Long Beach appears partly driven by easing import demand and partly by a shift in volumes to East and Gulf coast ports. That shift is believed to be driven by shipper concerns over peak season congestion in Southern California and the expiring West Coast port labor contract. As peak season slides in for the holidays, many players are hedging their bets and changing routes, anticipating congestion.
Meanwhile, the Los Angeles/ Long Beach ports may have significantly fewer vessels waiting to berth, but conditions at the terminals are still not ideal. Of the total terminals at the LA port, 31,150 were waiting to load on railcars. Normally, there would be around 9,000. There were 20,710 rail-bound containers that had been waiting nine or more days. Normally, none would dwell that long. That’s well below highs seen in July and October 2021 but still above levels recorded in the first quarter. Port congestion as a whole needs to be the focus of various shipping outfits, for a smooth supply chain and logistics network in the future.
Highlights
- Faced with sluggish consumer demand, Gap, Kohl’s, and Nordstrom are deploying deep discounts and pulling items from the shelves. With rising inflation, retailers have shifted from scrambling to secure supply to aggressively clearing excess inventory.
- US manufacturing may be poised for an overhaul and a rebound, with a potentially significant impact on the nation’s overall economy, according to a McKinsey study.
- With the automotive future being electric, automakers and battery firms are spending unprecedented sums of money for electric vehicle (EV) battery production in North America.
- Long-term box freight rates continue to climb but are finally showing signs of coming under pressure. Data from the online platform Xeneta shows that long-term rates increased 4.1% in August, standing 121.2% higher than this time last year.
- The U.S. Food and Drug Administration announced the removal of N95 respirators from the agency’s medical device shortage list, signaling that demand or projected demand for this type of face protection device commonly used in health care settings no longer exceeds the supply.
Trending
Since early this year, companies across numerous industries that ship goods via rail have issued increasingly stark warnings that the US freight system is in a state of crisis—complaining of weeks-long waits for trains, backed-up facilities, clogged ports, and suspended business. The port congestion that has spread across various ports and terminals finally spilled into the rail freight network as well. As a result, terminals at ports have been running over capacity. The US rail freight crisis threatens to put the supply chains under greater pressure with higher chaos, disrupting the transport of important goods to their destinations.
In April, the STB held hearings on the meltdown, where representatives from sectors including agriculture, energy, and chemicals joined trade unions to complain of poor service and working conditions. The Surface Transportation Board data says railroads cut their workforce by 45,000, or 29%, over the past six years, with pandemic furloughs pushing staffing levels past a tipping point. By late May, only 67% of trains arrived within 24 hours of their scheduled time, down from 85% pre-pandemic, according to data submitted to the STB by the four largest US freight railroads.
This data points to a major issue concerning US railroads, namely the lack of personnel or manpower. To add fuel to the fire, the US freight rail system is now facing more challenges because of a contract dispute between 115,000 rail workers and their employers. Negotiations have dragged on since the last contract expired in 2019, during which time rail workers have not had a raise.
Clearly, if there is a long-term rail strike, it could paralyze the US rail freight system and disrupt supply chains massively. While alternatives like roadways and air freight can be considered, the sheer amount of freight to be transported means that this rail dispute will have to be solved before the peak holiday season begins in earnest for things to go well.
